Skip to main content

Analysis

Medtronic Subsidiaries Pay $31M to Settle Criminal, Civil Complaints

By John Commins  
   December 05, 2018

Ev3 Inc. will plead guilty to criminal misdemeanor charges and pay $17.9 million for distributing adulterated devices; Covidien LP has paid $13 million to resolve civil kickback allegations for a second device.

Minnesota-based ev3 Inc. will pay the federal government $17.9 million to settle criminal allegations that it distributed an adulterated neurovascular medical device, the Department of Justice said.

Also this week, Covidien LP, paid $13 million to resolve civil False Claims Act allegations in a whistleblower suit that alleges the device maker paid kickbacks to hospitals that used its Solitaire mechanical thrombectomy device, DOJ said.

Both companies are subsidiaries of Medtronic, which acquired them in 2015, after the alleged infractions occurred.

"The Department of Justice will hold corporations accountable when they violate laws designed to protect consumers and protect public funds," said Assistant Attorney General Jody Hunt of the DOJ's Civil Division. "This resolution demonstrates the department's continued commitment to protect taxpayer dollars and deter companies from putting profits before patient safety."

In documents filed this week in a Massachusetts federal court, ev3 will plead guilty to a misdemeanor charge in connection with the company’s distribution of adulterated Onyx, in violation of the Food, Drug and Cosmetic Act.

As part of the criminal resolution, ev3 will pay a fine of $11.9 million and will forfeit $6 million, DOJ said.

Onyx was approved by the Food and Drug Administration as a liquid embolization device that is surgically injected into blood vessels to block blood flow to arteriovenous malformations inside the brain.

Despite the FDA's limited approval of Onyx, ev3 sales representatives from 2005 through 2009 encouraged surgeons to use Onyx in large quantities for unproven and potentially dangerous surgical uses outside the brain.

"The company's sales force continued to tout unapproved and potentially dangerous uses of Onyx even after FDA officials told ev3 executives that they had specific safety concerns regarding uses of Onyx outside the brain at a 2008 meeting," DOJ said. 

"Rather than conduct a study to ensure the safety and effectiveness of Onyx for uses outside the brain, ev3's sales representatives sometimes attended surgical procedures and provided explicit instructions to surgeons regarding how to use Onyx for unapproved surgical procedures outside the brain, including in quantities far larger than what would be used in the brain," DOJ said.

In addition, ev3's management used sales quotas and bonuses that incentivized sales representatives to sell Onyx for unapproved uses and trained the sales force how to instruct physicians on unapproved uses of the device, DOJ said.

"Ev3 disregarded laws designed to protect patient safety," said U.S. Attorney Andrew E. Lelling for the District of Massachusetts.

Covidien acquired ev3 in 2010, before the crimes covered in the plea agreement. Covidien was acquired by Medtronic in 2015.

Covidien Paid Kickbacks

Covidien separately will pay $13 million to resolve its civil liability for allegedly paying kickbacks to induce the use of its Solitaire mechanical thrombectomy device, which is designed to restore blood flow and retrieve a blood clot in certain stroke patients.

Federal prosecutors alleged that Covidien paid kickbacks to hospitals to induce them to use the Solitaire device, and thus file false claims to Medicare to pay for the device.

After receiving FDA clearance for Solitaire, Covidien launched a registry to pay hospitals and institutions to collect data about user experiences with the device. For two years, beginning in August 2014, Covidien paid hospitals that participated in a registry each time they used a new Solitaire device and reported certain clinical data about their practices for treating stroke patients to Covidien.

Prosecutors allege that Covidien solicited hospitals for the registry in order to convert their business from the competitor's product and persuade them to continue using Covidien products, using the registry to increase device sales. 

"As part of an aggressive marketing campaign for its medical device, Covidien allegedly found a way to subsidize facilities that agreed to use its product—often convincing them not to use devices sold by another manufacturer," said U.S. Attorney Nicola T. Hanna for the Central District of California.

"Patients deserve to know that their medical providers are offering the best possible treatments and are not making decisions based on increasing the bottom line for healthcare providers," Hanna said.

The whistleblower in the lawsuit, Jeffrey Faatz, worked for Covidien from 2012 to 2014, and will receive $2 million from the settlement.

Medtronic Responds

Medtronic issued a statement noting that: "The plea agreement and settlements that the Medtronic entities agreed to all concern matters that took place either largely or entirely prior to Medtronic acquiring the businesses in which the activities took place."

"Medtronic has made significant investments in ensuring that it fulfills its obligations to all of its stakeholders and to do business the right way."

Medtronic also agreed to conduct compliance monitoring related to the Onyx sales.

“ev3 disregarded laws designed to protect patient safety.”

John Commins is a senior editor at HealthLeaders.


KEY TAKEAWAYS

Ev3's sales reps ignored FDA warnings and touted the use of Onyx for unproven and potentially dangerous surgical uses outside the brain.

Covidien paid hospitals that participated in a registry each time they used a Solitaire device and reported certain clinical data about their practices.

The allegations against both companies occurred before Medtronic acquired them in 2015.


Get the latest on healthcare leadership in your inbox.